Home Banking Prepaid Debit Cards The Pros and Cons

Prepaid Debit Cards The Pros and Cons

by Finance Spot

Since they were introduced back in 1996, prepaid debit cards have grown in popularity. Back then, it was enough to just load up your card with a set amount of money and use the card for payment. Nowadays, the cards are so much more versatile and flexible because they can not only be loaded up with your own cash but can also be topped up with a credit or debit card as well as direct deposit from employers.

There are many factors to consider when choosing a prepaid debit card, and it is important to understand these factors before you sign up.

What Is a Prepaid Debit Card?

When it comes to spending money, you have two choices – cash or cheques. When you use cash, you simply pay for what you buy and there is no trace of the transaction left behind in any record-keeping system. With cheques, however, the bank keeps track of every single transaction – their records show how much money everyone has in their accounts as well as how much those people spend.

Prepaid debit cards are a combination of the two choices. The two main characteristics that come with using a prepaid debit card are:

1) You can only spend the amount of money you have loaded onto it. There is nothing to track and no need to share personal identification details, as there is with credit cards, and there is no paper trail – the same as with cash.

2) Since one of the advantages of cheques is that they can be replaced if lost or stolen, prepaid cards offer this very same protection. They come with an assigned card number and pin number that can be used to cancel them if lost or stolen before any damage has been done.

Advantages of Prepaid Debit Cards

prepaid debit cards

The modern prepaid debit card has virtually eliminated the risk of fraudulent activity. It uses a unique card number and pin number, both of which can be cancelled immediately if lost or stolen. There is no personal information to collect, unlike with credit cards and PayPal, so no one can use the information to steal your identity or empty your bank accounts. In addition:

You don’t need a current account because you load your own money onto the card. You do not have to worry about being declined when trying to spend money on a prepaid debit card because it only holds the amount of cash you load on it at any given time.

You can cancel your card at anytime and you need not be concerned about losing money or going through overdraft fees.

Your money is always separate from other accounts, and you control it all yourself. There is no sharing of information between banks when it comes to debit cards.

Disadvantages of Prepaid Debit Cards

Despite the fact that there are many advantages, prepaid debit cards also come with a few disadvantages:

There is no paper trail to link a possible transaction with you. At times you may find yourself using the card to pay for things online without knowing for sure that the transaction was legitimate as there is no way to prove this. Some companies may require additional identification, like a secondary number you use on the card.

There is a possibility of someone stealing your card information and using it to make purchases online or over the phone. The probability is higher when you use the card to make purchases online or when paying with an unfamiliar merchant.

If you have other debt, such as credit cards or student loans, then it is important to pay them off before getting a prepaid debit card. This will help you avoid incurring further debt and begin your new life free from credit card debt.

When you get a prepaid debit card, make sure to set it up properly so that you can take advantage of all of its great features. This will help you avoid incurring unnecessary fees and ensure that your card runs smoothly and without interruption.

How to Choose the Best Prepaid Debit Card

If you are planning on getting a prepaid debit card, there are some key things to know before making your decision:

1) Your prepaid card should have no activation fee or other enrollment charges. There should also be no monthly fees or service charges. Some cards do charge for various things like ATM fees or reloading your own money onto the card but these should be minimal in order for you to choose wisely.

2) The card should have a history of transactions that are linked back to the card number and PIN. This way, you will know that your payments were made and that there was no fraud. Fraud can occur for many different reasons, but it is very rare to come across a debit card that has been compromised. If there are any fraud charges, they should be small and transparent – this way it’s easier to report them to your issuing bank so they can investigate the situation as soon as possible.

3) Contact the issuing company if you have questions or concerns about any fraudulent charges or if there are any changes you want to make with any of your purchases. You are allowed to make a change or ask for more information at any time.

4) When choosing a prepaid debit card, it’s important to take into consideration the fees that are attached to some cards. Some cards charge a monthly fee if you choose not to load money onto them, and others will charge other fees for making purchases or using your card at an ATM. The lower these fees are, the better your card will be in the long run – but it is still important to find a company that works for you and your particular needs.

5) Make sure that you have a PIN that can be used every time you need it in order to ensure that your card isn’t lost or stolen. If you forget your PIN, make sure to write it down and keep it in a place where you can easily find it.

6) You are given the option of calling customer service or writing them an e-mail if there are any questions or concerns about your card. These companies are very willing to assist with any issue that may arise.

At the end of the day, prepaid debit cards are great for people who are trying to get away from credit card debt and need to start small but it is important to choose carefully when picking out your card. If you go too low or too high with your initial amount, this can set you back in building up any kind of credit history. Just make sure that you know what is available before choosing a card for yourself.

Remember: If you already have a credit history, a prepaid debit card can be paired with a secured credit card and a high-limit secured credit card as well. When combined like this, the other two cards act as layers of protection so that your new money is secured as well.